Few possible roll-outs from RBI

The central bank will be ringing in new measures for FY14. Here is a look at a few possible roll-outs from RBI.

Regulating Incentives for Bank Staff

The Reserve Bank of India in its monetary policy statement for the year 2013-14 could propose framing of norms to regulate incentives given to banking staff, particularly the sales executives. The central bank is forced to contemplate new measures following a sting operation by Cobrapost.com, an online media company, which allegedly showed staff at Axis Bank, HDFC Bank and ICICI Bank as keen to help customers avoid tax and circumvent rules to convert black money into white. The regulator could set up a committee or ask bank boards to formulate rules to review the incentive structure of sales staff.

Prudential Norms For Banks

The regulator is expected to release a timetable on higher provisions for banks. Early Feb, RBI had issued a draft norm, which suggested that banks raise provisioning on restructured loans by 100 bps. RBI may also clarify if higher provisions are for the entire loan book or if they would be applicable only for the new stock.

Breather for Gold Finance Cos

The RBI may relax norms for gold finance, giving a boost to the business of lending against gold which has been hit due to the fall in gold prices. A committee headed by KUB Rao suggested measures to strengthen the business model by raising the loan-value ratio to 75% from 60%.

Timeframe for Inflation-indexed Bonds

The RBI may give out a timeframe for the introduction of inflation-indexed bonds as promised in the budget in order to draw in household savings from other sources of investment like gold. The central bank could also look at bringing down the hold-to-maturity, the part of the banks’ investment portfolio where bonds are held till maturity and not for trade. It could be brought down to 23% from 25% currently. Mutual funds and insurance companies could now directly trade in bonds on becoming members of exchanges, once the regulators notify.